While I mostly agree with you, having a rank *should* imply some level of knowledge. It's pretty tough to teach certain empty hand techniques to people who can't breakfall, or paired sword kata to people who don't know the basic cuts and stances. Mixed classes can end up being frustrating for all concerned: advanced students can't stretch themselves because their partners aren't ready, while beginning students end up lost because they don't have a foundation yet. Segregating classes by rank allows the teacher to assume that everyone in the class has a certain level of understanding.

My current dojo has three levels:
-- Beginner: open to everyone, required for brand new beginners
-- Open: open to everyone with basic ukemi skills, which generally means 6th kyu (our lowest rank) or above
-- Advanced: open to brown belts (3rd kyu) and above, or with the instructor's permission